The answers are framed based on the Public Consultation Document published by the Ministry of Finance.
Will Free Zone Companies be taxed too?
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honor the tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.
Will a free zone business be required to register and file a CT return?
A business established in a free zone will be required to register and file a CT return even if the tax liability is nil.
Further details on the compliance obligations of free zone businesses will be provided by the authorities in due course.
Can we deduct salaries/ remuneration paid to shareholders out of the profits computed for CT?
Yes, it may be possible, if these persons are actively rendering services to the entity and compliance with prescribed limits are adhered.
We have different group companies. What would be the impact of CT?
The UAE CT regime will allow tax grouping for essentially wholly owned groups of companies. The group entity will be allowed to file a single tax return. It will also help in offsetting the losses of a company with the profit of other group companies that are 75% or more commonly owned, thereby reducing the CT compliance burden.
Which incomes earned by normal individuals are exempt from corporate taxation?
All incomes, except business income, generated by individuals will be outside the ambit of corporate tax. Income earned by individuals from a business under a commercial license including a freelance permit or license will be taxable.
How can an entity save tax?
The CT tax regime of the UAE offers one of the lowest tax rates. 0% tax is applicable on threshold income up to AED 375,000 and thereafter, the tax rate is 9% on taxable income. Efficient Tax planning allows the entities to reduce their tax liability by claiming all the rebates, exemptions, and deductions as per the proposed CT law. An entity must also ensure to keep proper books of account.
How to determine the tax period?
The CT will apply to financial years starting on or after 1 June 2023. For financial year-ending (FYE) 31 May, an entity should file the first UAE CT return for the FYE 31 May 2024, and for FYE 30 September should file its first UAE CT return for the FYE 30 September 2024, and for FYE 31 December should file their first UAE CT return for FYE 31 December 2024. The due date for filing CT returns is 9 months from the end of the Financial Year.
Will UAE CT apply to businesses in each Emirate?
The UAE CT is a federal tax and will therefore apply across all Emirates.
Can we adjust the loss?
Accumulated taxable losses shall be allowed to offset future taxable profits for an indefinite period. However, backward offsetting of tax loss will not be permitted. In other words, losses of the current year are not permitted to be offset from past taxable profits.
Please refer to and follow the latest rules and clarification by FTA.
Romil Singhvi, CEO
Aspire Consulting
